With such an unsteady market, it’s hard to feel safe leaving your money anywhere. But if you’re looking for a guarantee that your money will be secure, it’s hard to do better than AT&T Inc. (NYSE:T).
In fact, not only is T stock a safe bet — it’s actually starting to show signs of life after an initial dip following its fourth-quarter earnings.
Yes, T stock is underperforming its peers — T stock is barely in the black for the year to date, just behind Verizon Communications Inc. (NYSE:VZ) and miles away from the respective 6% and 15% gains of Sprint Corp (NYSE:S) and T-Mobile US Inc (NYSE:TMUS).
But all that matters for new money is where AT&T’s headed. So let’s look at why AT&T is a solid value stock to invest in for 2015:
- T stock offers a killer dividend: AT&T offers a 5.6% dividend yield, making it the highest-yielding dividend stock in the Dow Jones Industrial Average. It’s nearly a percentage point higher than Verizon, which itself boasts a 4.7% yield. In short, T stock’s generous dividend means that even in flat years, you’re getting a good chunk of change.
- AT&T stock is priced right: T stock is reasonably valued at a forward price-to-earnings ratio of 13, which is well under the S&P 500’s current forward P/E of 17.
- Earnings beat expectations: The fourth quarter is the least profitable for wireless companies, according to Thomas Gyrta of the Wall Street Journal, but AT&T still came out strong. AT&T earned 55 cents per share for its fourth quarter, beating estimates and making for one of the smaller Q4 drop-offs in the past few years.
- AT&T is investing wisely: What money AT&T isn’t using on dividends is going to smart investments, such as expanding its market to Mexico. With the acquisition of Nextel Mexico, AT&T plans to become the leading mobile company in Mexico. AT&T’s acquisition of DirecTV (DTV) also expands its revenue base. .
- Consumer strategies are working: AT&T saw subscriber growth thanks to its Next program and Mobile Share Value program. Looking ahead, AT&T also has adopted a rollover plan following in the footsteps of competitor T-Mobile. While AT&T no longer has the thunder it once did as the lone provider of the Apple Inc. (NASDAQ:AAPL) iPhone, plans like these have helped AT&T stay plenty relevant.
Yes, AT&T is a more “sleepy” stock than most, but thanks to several growth catalysts and a huge dividend you can depend on in lean times, AT&T presents one of the better safety plays in the market.
As of this writing, Dana Kobilinsky did not hold a position in any of the aforementioned securities.
